Subsidiary’s shares transactions: Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available. Although the parent may not participate directly when subsidiary purchases treasury stock , the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements. Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent. Computation of book value of shares held by P and record the entry in P’s books to record the change in book value of its investment in S’s shares.

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Answer 1

Question

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions:Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

Computation of book value of shares held by P and record the entry in P’s books to record the change in book value of its investment in S’s shares.

b.

To determine

Subsidiary’s shares transactions: Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

The Computation of book value, entries in books of S and consolidation entries in case of direct purchase from P on January 1. 20X7.

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On July 1, 20x6 TRUST Company purchased 80% of the outstanding shares of DUREX Company at a cost of Pl,600,000. on that date, DUREX had P1,000,000 of capital stock and P1,400,0a00 of retained earnings. For 20x6, TRUST had income of P560,000 from its separate operations and paid dividends of P300,000. For 20x6, DUREX reported income of P130,000 and paid dividends of P60,000. All the assets and liabilities of DUREX have book values equal to their respective fair market values. Assume income was earned evenly throughout the year except for the intercompany transaction on October 1. On October 1, TRUST purchased an equipment from DUREX for P200,000. The book value of the equipment on that date was P240,000. The loss of P40,000 is reflected in the income of DUREX indicated above. The equipment is expected to have a useful life of 5 years from the date of sale. In the December 31, 20x6 consolidated statement of financial position, how much is the consolidated net income attributable to the…

On January 1, 20X1, Pinto Company purchased an 80% interest in Sands Inc. for $1,000,000. The equity balances of Sands at the time of the purchase were as follows: Common stock ($10 par) $100,000 Paid-in capital in excess of par 400,000 Retained earnings 500,000 Any excess of cost over book value is attributable to goodwill. No dividends were paid by either firm during 20X6. The following trial balances were prepared for Pinto Company and its subsidiary, Sands Inc., on December 31, 20X6: Pinto Sands Cash 120,000 70,000 Accounts receivable 240,000 197,000 Inventory 200,000 176,000 Land 600,000 180,000 Buildings and equipment 1,100,000 800,000 Accumulated depreciation (180,000) (120,000) Investment in Sands 1,000,000 Accounts payable (110,000) (50,000) Common stock, $10 par (800,000) (100,000) Paid-in capital in…

Answer 2

Question

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions:Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

Computation of book value of shares held by P and record the entry in P’s books to record the change in book value of its investment in S’s shares.

b.

To determine

Subsidiary’s shares transactions: Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

The Computation of book value, entries in books of S and consolidation entries in case of direct purchase from P on January 1. 20X7.

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Answer 3

Question

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions:Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

Computation of book value of shares held by P and record the entry in P’s books to record the change in book value of its investment in S’s shares.

b.

To determine

Subsidiary’s shares transactions: Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

The Computation of book value, entries in books of S and consolidation entries in case of direct purchase from P on January 1. 20X7.

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Answer 4

Question

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions:Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

Computation of book value of shares held by P and record the entry in P’s books to record the change in book value of its investment in S’s shares.

b.

To determine

Subsidiary’s shares transactions: Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

The Computation of book value, entries in books of S and consolidation entries in case of direct purchase from P on January 1. 20X7.

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Answer 5

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions:Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

Computation of book value of shares held by P and record the entry in P’s books to record the change in book value of its investment in S’s shares.

b.

To determine

Subsidiary’s shares transactions: Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

The Computation of book value, entries in books of S and consolidation entries in case of direct purchase from P on January 1. 20X7.

Answer 6

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions:Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

Computation of book value of shares held by P and record the entry in P’s books to record the change in book value of its investment in S’s shares.

Answer 7

Chapter 9, Problem 9.23P

To determine

Subsidiary’s shares transactions:Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

Computation of book value of shares held by P and record the entry in P’s books to record the change in book value of its investment in S’s shares.

Answer 8

b.

To determine

Subsidiary’s shares transactions: Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

The Computation of book value, entries in books of S and consolidation entries in case of direct purchase from P on January 1. 20X7.

Answer 9

b.

To determine

Subsidiary’s shares transactions: Sometimes subsidiary purchases treasury shares from non-controlling shareholders. The parent company may prefer not to be concerned with outside shareholders and may direct the subsidiary to reacquire any non-controlling shares that become available.

Although the parent may not participate directly when subsidiary purchases treasury stock, the parent’s equity in the net assets of the subsidiary may change as a result of the transaction. The change must be recognized in preparing the consolidated statements.

Reciprocal ownership: A reciprocal relationship is when two companies hold stock in each other. It is a rare practice. The method of dealing with reciprocal relationships is found mostly in the treasury stock method. Under treasury stock method, purchases of a parent’s stock by subsidiary are treated in the same way as if parent had repurchased its own stock and was holding it in the treasury. The subsidiary will account it as investment in parent’s stock using the cost method, as such investments usually are small and almost never have the ability to significantly influence parent.

The Computation of book value, entries in books of S and consolidation entries in case of direct purchase from P on January 1. 20X7.

Answer 10

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Answer 11

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Answer 13

Ch. 9 - Prob. 9.1Q Ch. 9 - Prob. 9.2Q Ch. 9 - Prob. 9.3Q Ch. 9 - Prob. 9.4Q Ch. 9 - Prob. 9.5Q Ch. 9 - Prob. 9.6Q Ch. 9 - Prob. 9.7Q Ch. 9 - Prob. 9.8Q Ch. 9 - Prob. 9.9Q Ch. 9 - Prob. 9.10Q

Solution Summary: The author explains how a subsidiary purchases treasury shares from non-controlling shareholders. Reciprocal ownership is when two companies hold stock in each other.

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